EuroCham displays a guiding hand

EuroCham’s “2013 Whitebook of Trade/Investment Issues & Recommendations” was released late last week to draw the attention of national policy-makers to the year’s top trade and investment issues facing European firms in Vietnam.

Three reoccurring themes in this year’s Whitebook are pricing, the role of the state sector and intellectual property rights (IPR) issues.

According to EuroCham, the government continues to display an ambivalent attitude towards free market pricing, and in sectors like energy, price changes now require approval.

EuroCham finds this type of price control worrying as investors expect to be able to set prices themselves within the normal boundaries of cost and competition.

EuroCham said it was estimated that 40 percent of the Vietnamese economy was in the hands of the state sector, which in itself was not a problem. “However, in those areas, state companies generally receive favourable treatments through loans, access to land, limited profit targets and others which hampers the growth of the economy.”

The Vietnamese government has expressed the desire and need to move away from a labour intensive economy into technology and value-added areas. However, according to EuroCham, unless there is real, implemented protection of intellectual property rights, investors are unlikely to bring their technology to Vietnam, and Vietnam will remain in the low labour cost trap.

EuroCham chairman Preben Hjortlund said that in practice, real protection for IPR remained very limited.

In order to give a clearer outline of the issues, the Whitebook 2013 has a new, improved layout which pinpoints the main issues in each industry sector and provides suggestions for how to address them.

The book includes chapters on the Vietnam-EU Free Trade Agreement (FTA), for which negotiations have just started; as well as human resources and training, IPR, logistics and transport, taxation and transfer pricing. Other chapters cover information technology, nutritional food for infants and toddlers, pharmaceuticals, tourism and hospitality, energy, mergers and acquisitions, and World Trade Organization commitments.

“This year we have tried to make the White Book more readable, and thus more useful, than the past by providing a top 10 list of recommendations for each industry” Hjortlund said. If implemented, these top 10 recommendations are the ones which would have the biggest benefit for European investors and, thus for foreign direct investment flows and the economy of Vietnam.

“We hope that like the prior editions, this year’s White Book will be well received and more importantly a helpful tool for the Vietnamese government. As always, EuroCham is prepared to further advise on the implementation of any of the proposed changes and remains confident that together, we can overcome the challenges ahead and boost quality long term investments in Vietnam,” he noted.

Vietnamese Government, Hjortlund stressed, had achieved much in the last year in terms of controlling inflation, but many issues remained, which needed to be addressed, and which were acting as a brake on European direct investment.

At the launching of the Whitebook, Hjortlund said that according to EuroCham’s Business Climate Index (BCI) European businesses’ perception of Vietnam as a business destination has further declined this year – for the first time going below the mid-point of 50. Many of EuroCham’s concerns are shared by non-European companies doing business in Vietnam.

EuroCham’s members remained positive for the medium term development of Vietnam, but were concerned at a lack of progress on many issues in the short term. Many members were reporting an increase in business hurdles, through increased scrutiny and bureaucracy. In the medium term, the members were optimistic and ready to invest once the business environment in Vietnam improves, he stressed.

EuroCham’s executive director Paul Jewell said that recent developments such as the beginning of negotiations for the Vietnam-EU FTA represented an important signal for Vietnam. “The coming years will determine the longer term future of Vietnam, and if the government is successful in addressing the issues identified by the business community and a comprehensive FTA is agreed, then Vietnam would be a strong regional player.”

Jewell added that this could lead to a further increase in the quantity and quality of foreign direct investment and that EU enterprises increasingly would perceive Vietnam as their ASEAN hub or even headquarters, from where they could service efficiently both ASEAN markets and neighbouring countries.

“EuroCham therefore believes that the White Book 2013 represents an important opportunity for the Vietnamese government to demonstrate its future economic aspirations and send a clear signal to the business community that Vietnam is ready to do business.”

The White Book covers the major industries that EuroCham’s almost 800 member companies operate in, such as pharmaceuticals, fast-moving consumer goods, energy, telecom, automotive, tourism and banking.

Hjortlund said over the last five years, the government had discussed and considered issues raised in previous editions of the publication. “But we would like to see more action from the government,” he added.

Jean-Jacques Bouflet, head of trade and economic affairs at the EU Delegation to Vietnam, said that many of the issues highlighted in this year’s White Book “will be included and addressed in the Vietnam-EU FTA negotiations.”

According to Bouflet, the EU has recently become the most important trade partner for Vietnam in terms of trade and investment, but also politically. Today, the EU is the largest overseas market for Vietnam and a largely favourable relationship for Vietnam. The EU trade deficit with Vietnam surged to 7.72 billion Euros in 2011 from 4.9 billion Euros in 2010 and 3.77 billion Euros in 2009.

Hjortlund said EuroCham made its various suggestions within this White Book on behalf and in the interests of its members. However, he also underlined that “it is clear that in the vast majority of cases the recommendations are clearly in the long term interest of the Vietnamese government and people. The economy can only grow sustainably if the business climate is favourable, if there is a level playing field, if corruption and the resulting inefficiencies are banished, if government bureaucracy and oversight are reasonable.

“We sincerely hope our suggestions will assist the government to reach such a situation and we in EuroCham will continue to assist where possible in striving towards this goal,” added Hjortlund.